Senate ratifies bill imposing higher tax on tobacco products, covers e-cigarettes and vapes

The Senate, on Tuesday, ratified the measure increasing the excise tax on tobacco products, with the inclusion of heated tobacco products and vapor products in its coverage.

Its inclusion of heated tobacco and vapor products in the coverage of the measure increasing the excise tax on tobacco products will bring in an additional P2.1 billion in the projected P15 billion revenues.

The Senate's ratification of the bill, certified urgent by President Duterte, will likewise boost funding for the Universal Health Care (UHC) law and define further the distribution of the revenue share of tobacco-producing provinces.

From zero excise tax, heated tobacco products or the so-called e-cigarettes, will now be levied P10 per pack beginning Jan. 1, 2020 and five percent yearly increase effective Jan. 1, 2021

For vapor products, individual cartridge, refill, pod or container of its liquid solutions or gel will now be charged P10 per 10 milliliters (ml). If the product being sold is more than 50ml, it will be charged P50 excise tax plus P10 per additional 10ml.

The rates imposed on vapor products shall be increased by five percent every year effective Jan. 1, 2021.

The unit packets and any outside wrapping of heated tobacco products and vapor products shall also now carry a health warning, in compliance with the Graphic Warning Act of RA 10643 and will be prohibited for sale and distribution to minors.

The sale of such products to minors shall be punishable under RA 9211, otherwise known as the "Tobacco Regulation Act of 2003," which imposes a fine of not less than P5,000 or imprisonment of not more than 30 days upon the discretion of the court.

The bill which will impose an increase of P45 to P60 per pack in excise tax beginning next year to 2023 for regular cigars and cigarettes and a five percent yearly hike effective Jan. 1, 2024, also carries stiffer penalties against illicit tobacco trade, with the monetary fines being increased by five to 10 times or in millions of pesos.

The maximum penalty of imprisonment has also been adjusted from 12 years to 14 years.

The following scheduled increase: P45 per pack increase effective Jan. 1, 2020 until Dec. 31, 2021, P50 on Jan. 1, 2021, P55 per pack on Jan. 1, 2022 and P60 per pack effective Jan. 1, 2023.

Under RA 10963, also known as the Tax Reform for Acceleration and Inclusion (TRAIN) which took effect in Jan. 2018, the existing excise tax rates on cigarettes packed by hand and packed by machine is as follows: P37.50 per pack beginning Jan. 1, 2020; P40 starting Jan. 1, 2022; and four percent increase every year thereafter.

Proceeds from the taxes, 50 percent of which, will be used exclusively for the implementation of UHC and health programs to be determined by the Department of Health (DOH).

Portions of the revenues collected shall also be allocated and divided among the tobacco-producing provinces and utilized exclusively for programs to promote economically viable alternatives for tobacco farmers and workers.